A legacy application (app) refers to any outdated technology that needs to be replaced or updated. According to a recent study, one-third of all businesses continue using legacy apps that are over a decade old. Also, one-fifth of all companies have specific applications that haven't changed for over 15 years.
Legacy systems are often incapable of keeping up with modern workflow and workloads. In most cases, they also can't handle the sheer volume and power required for new work processes, which makes them more likely to crash periodically. To keep legacy apps, companies have to spend enormous amounts of time and resources on keeping them functional or updating them to meet present needs.
It's incredibly expensive to maintain and continue using these legacy apps. But it's not just the direct cost you have to be concerned about — it's also the indirect opportunity cost related to legacy apps. In this article, we discuss why companies keep legacy apps around, what are the opportunity costs of legacy apps, and how to resolve this problem.
Most companies don't upgrade or change their legacy apps because they're used to them or because they believe they serve their purpose. Companies get attached to their apps and don't want to go through the hassle of adjusting to a new set — so they keep their legacy apps around.
Businesses are afraid that trying new technology or apps will temporarily cease critical business operations. Or the upfront costs related to changing their apps, migrating all of their data and assets, and training the staff to handle the new apps will be too costly.
Since cost is the underlying reason companies are hesitant about changing legacy apps, let's examine the direct and indirect costs of legacy applications.
Opportunity cost is loosely defined as the cost of something based on lost opportunities. So, for example, if an older app runs slower and often crashes, leading to downtime, it leads to inefficiency in your business processes. In that case, the opportunity cost of that application will be the revenue loss in the total number of downtime hours.
So now that you understand what an opportunity cost is, let's look at all of the opportunity costs of maintaining legacy apps.
• Hiring more IT staff and training current staff that can manage and keeps up with the legacy applications.
• Handling and maintaining specific legacy applications requires niche skills, because of which you have to hire IT personnel at a higher wage. For example, a commonly-used legacy programming language made in 1959 called COBOL (Common Business Oriented Language). If your organization still uses this language, it can be challenging to find employees who understand this language.
• As legacy technologies get older, their parts become more obsolete and harder to find. As such, if your legacy technology breaks down, the cost of fixing it may be more than the maintenance cost of newer technology.
• The revenue lost due to the downtime caused by crashing, slow, or inefficient apps.
• Higher costs associated with integrating legacy apps with new apps, some of which may be incompatible with each other.
• Costs related to additional security measures.
According to some estimates, approximately 60% to 80% of IT budgets in most businesses go into maintaining legacy apps. As highlighted earlier, this is because your company has to hire IT personnel to handle and support legacy apps. Instead of focusing on productive tasks, most of your IT resources are related to maintenance tasks, which is a waste of resources.
Now that you understand what the opportunity costs of legacy apps are, you can analyze the utility of legacy apps in your organization. If you find that your legacy apps are proving to be expensive, you can work towards a solution. The following are some potential solutions to your legacy app problems.
In some cases, it's just not worth it to carry on with the legacy technology in any of its forms. It's not even worth it to update them. In that case, your best option will be to replace the technology altogether. You should put together a specialized project team that can assess all of your organization's needs and handles the replacement optimally.
Generally speaking, you can replace your current legacy technology and applications using packaged solutions or custom software development.
Packaged solutions refer to Commercial Off-the-Shelf (COTS) applications that you can integrate into your organization's systems with minimal coding and customization. If the app meets your organization's needs, then you'll be spared having to build an app from the very beginning, but be prepared for at least some development and coding.
Custom software development is one of the best solutions for replacement because you can create an application for your organization that meets all of your specific needs. However, this process can be time-consuming, expensive, and can lead to various developmental complications. You'll also need access to a trained and specialized IT team that accurately understands your business needs.
If you don't want to replace your legacy apps completely, you can update them by incorporating modern technology solutions. For example, you can add self-service portals, web enhancements, data mining options, business intelligence reporting, and analytic features. These features can be added to the front end of your current legacy application to increase its utility and provide a better user experience.
People often don't realize how much a legacy application is hurting their organization until they've genuinely assessed the opportunity cost of maintaining that application. Most organizations hesitate to update or replace their current applications because of the fear of additional costs. But as this article has highlighted, the cost of maintaining a legacy application can often be far higher than rebuilding or replacing it. You need to compare the costs and make an informed decision about what's the right call for your organization's future. If you recognize that the legacy application is too costly or inefficient, you can either replace it or update it to meet your current business needs.